In recent years, Singapore has emerged as a major Asian international arbitration hub. Find out what makes Singapore as the preferred seat of arbitration in Asia.
A major annual arbitration survey conducted by the Queen Mary International School of Arbitration in London, tipped Singapore as a regional leader for hosting arbitral disputes in Asia. The findings of the 2010 Queen Mary International School of Arbitration survey – which is based on the opinion of various corporations – also shed light on the reasons for the role Singapore plays in resolving arbitration disputes in the region.
The survey indicates that while negotiating the dispute resolution clause of a contract, most corporations expressed a ‘reasonably strong preference’ for the seat of arbitration. The choice of the seat for arbitration was to the greatest extent influenced by the ‘formal legal infrastructure’ of the seat, followed by the law governing the contract and the convenience of the seat for both parties.
Neutrality: In the context of arbitration, neutrality refers to two aspects – neutrality of the seat vis-à-vis the parties to the dispute, and political and cultural neutrality of the seat of arbitration in itself. The first of these attributes is case specific, but for disputes that do not involve a Singaporean party – which accounts for a significant number of the cases arbitrated in Singapore – Singapore provides the necessary neutrality. Even in its own right, Singapore is largely perceived as a neutral and impartial venue for the arbitration of disputes. Politically, Singapore is perceived as having maintained a neutral position in its international relations. That Singapore has no administrative nexus to any other nation puts it in contrast to the other major arbitration seat in Asia – Hong Kong. The perception of neutrality and impartiality of Singapore is further highlighted by the fact that Singapore was ranked as one of the least corrupt countries in the world as per the 2010 Transparency International Corruption Perceptions Index.
Arbitration Friendliness of the Jurisdiction: Singapore has also made an active effort, over the past two decades, to establish itself as an arbitration friendly jurisdiction. The legislation governing arbitration in Singapore – both the Arbitration Act governing domestic arbitrations, and the International Arbitration Act governing international arbitrations – is modelled on the UNCITRAL Model Law which was promulgated as abest practice basis for national arbitration laws by the United Nations Commission on International Trade Law. Singapore is also a signatory to the 1958 New York Convention on the Enforcement of Arbitral Awards.
Singapore’s legislators have also been proactive in periodically updating its legislation to ensure that it stays up to date, fit for purpose and that any gaps that are identified are quickly filled. As Singapore’s Minister for Foreign Affairs and Law has noted: “Our approach in Singapore is: we see a problem, and where it can be solved legislatively, we are in a position to do that within three to six months.” The currently proposed amendments to the arbitration legislation to address issues such as oral arbitration agreements, clarifying the scope of the arbitral tribunals power to award interest etc., are part of this continuing process of fine tuning which helps keep the arbitration regime abreast with commercial needs.
The courts in Singapore have also been responsible in their handling of arbitration related cases. Courts have been given wide powers to support the conduct of arbitrations – such as the power to stay proceedings in the face of a valid arbitration agreement, the power to make interim orders to support arbitration proceedings inside or outside Singapore, assist in the collection of evidence in support of an arbitration etc. On the other hand, especially in the sphere of international arbitration, courts have been given very limited powers of intervention. Even in exercising these limited powers, courts have generally adopted a pro arbitration approach and have been reluctant to interfere with proceedings or set aside otherwise valid arbitral awards.
The Queen Mary survey suggests that parties have a strong preference for the governing law of the contract and the choice of the seat is quite often influenced by the choice of law. It therefore appears that one of the reasons for the success of London, Paris and New York as seats for international arbitration has been the close nexus of these jurisdictions with English, French and New York law respectively – all of which are popular legal regimes for businesses.
The legal regime of Singapore is not yet sufficiently popular for it to have a noticeable rubbing off effect in parties’ choice of Singapore as a seat of arbitration (If anything, the process currently works the other way around; Singapore law is considered since the parties plan to seat an arbitration in Singapore). However, the broad structure of the legal regime and the open-mindedness of policy makers has come a long way in overcoming this ‘limitation.’
Singapore is an established common-law jurisdiction. The legal system largely mirrors the English legal system in its approach. Singapore therefore proves an attractive jurisdiction for parties – especially from common law jurisdictions – looking for a neutral law to apply to their contracts and resolve their disputes.
Singapore has taken a number of important steps in recent years to augment its position as a preferred seat of arbitration in Asia. One of these steps has been the opening of Maxwell Chambers, a state-of-the-art arbitration facility. Another important step has been recent updates to the arbitral rules of the Singapore International Arbitration Center, to bring those rules fully in line with global best practices for the conduct of international arbitrations.
It is cost effective for Indian companies to opt for institutional entities outside India for dispute resolution. Internationally recognized arbitration centers such as the SIAC are committed to providing prompt, fair and cost effective resolutions to disputes among the parties who turn to them for assistance.
Singapore is also remarkably open and conducive to the resolution of disputes based on other legal systems. The liberalization of legal services has allowed foreign law firms to operate and conduct international arbitrations in Singapore. This policy, together with healthy tax incentives, has resulted in a total of 101 foreign law firms opening offices in Singapore (as at 1 October 2010). This has brought with it a pool of extremely talented lawyers, skilled in the laws of various jurisdictions across the world.
The government has also taken specific steps to encourage conduct of international arbitration within Singapore. The Ministry of Manpower announced during 2008 that “Providing arbitration or mediation services (e.g. as an arbitrator or a mediator)” qualifies as a “work pass exempt activity”. This meant that experienced arbitration practitioners now had greater flexibility in conducting international arbitrations even within Singapore. The government also amended the Legal Profession Act in 2004 to enable foreign practitioners to represent parties in arbitration in Singapore where Singapore is the governing law (which previously had been a restricted area).
The net effect of these developments has been to encourage parties to choose Singapore as a seat of arbitration, for all of its other virtues, irrespective of what law is chosen by the parties to govern other aspects of the arbitration.
The convenience of a seat is usually measured by the interplay of various factors such as efficiency of the court system, familiarity of lawyers within the region, location, language and culture etc.Singapore performs exceedingly well in all of these parameters.
Judiciary: The judiciary in Singapore complements the pro-arbitration policy of the government. Particular judges of the High Court have been designated to hear all applications arising out of arbitration matters which has resulted in ensuring that the judges dealing with such cases have the requisite experience and understanding of arbitration, and that arbitral jurisprudence has a consistent approach. The courts in Singapore also enjoy the reputation of being extremely efficient in their handling and disposal of cases.
Lawyers: As noted in the previous section, the government has actively pursued policies that have allowed an extremely talented pool of lawyers to operate out of Singapore. Almost all of the major law firms across the world now have offices in Singapore. This has meant that clients have the security of using the best of law firms, including invariably the law firms used by clients in their home jurisdictions, even while resolving their disputes in Singapore.
Location: Singapore is strategically located to cater to the whole of the Asia-Pacific region. It is geographically proximate and has excellent connectivity with all of the countries in the region and beyond. To quote a brochure of the Singapore Academy of Law: “It takes less than seven hours to fly to Beijing, Hong Kong, Jakarta, Mumbai, New Delhi, Shanghai, Tokyo and Seoul.”
Language and Culture: English is the most commonly used language in Singapore and is the language of the courts. This familiarity with the dominant language for international trade and commerce, gives Singapore a distinct advantage in handling commercial disputes. Culturally, Singapore is a melting pot. Of the 5.08 million population of Singapore, only 3.23 million are Singapore citizens – people from across the globe making up the remaining 1.85 million. Even the local population of Singapore is a mix of people of Chinese, Malay, Indian and other origin. Thisdiversity provides foreigners a suitably comforting and neutral environment within which to resolve their disputes.
Costs: Legal costs in Singapore are generally considered to be lower than those in several other major arbitration destinations around the world. Illustrative are the findings of the report “Competitive Alternatives,” a guide published by KPMG in 2006 to compare business costs across nine top industrialised countries. It rated Singapore as the least expensive among the countries analysed. In particular, Singapore was about 20% less expensive than countries such as USA, UK and France.
Infrastructure: Singapore provides excellent infrastructure facilities for the conduct of international arbitrations. The Singapore government has once again led this exercise. It financed the establishment of Maxwell Chambers, which after years of preparation was finally opened in January 2010. Maxwell Chambers is touted to be the world’s first integrated dispute resolution complex. It provides state of the art hearing facilities with excellent technological support. It also houses most of the top international arbitration institutions – including the Singapore International Arbitration Centre, the International Chamber of Commerce, the American Arbitration Association, the Permanent Court of Arbitration and the International Centre for the Settlement of Investment Disputes. In addition, an ever increasing number of arbitration and mediation specialists are also setting up their offices in the complex.
All of these reasons have played a role in giving Singapore a significant attraction to host the conduct of international arbitrations between parties across the world – especially such disputes as involve parties within the region.
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